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Prospects for Investment in Poland
April 7, 2010 By Tomasz Sobociński   
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As far as investment risk is concerned, bank deposits are the easiest and safest form of investing one's money. Reports by Poland's central bank show that savers have stashed away over zl.385 billion in bank accounts and deposits. In other words, the average Pole has invested over zl.10,000 in banks or using banking services. In February alone, bank savings grew by another zl.4.9 billion, expanding by over zl.8.5 billion since the start of the year.

After the turbulence on stock exchanges at the end of 2008 and the first quarter of last year, bank deposits have become the most popular form of saving money. Even though the nominal interest rate on even the most profitable deposits never rises above 7 percent and the real interest rate stays below 3.5 percent per annum, people in Poland feel protective about their capital and are often wary of investing in stock, even when promised a high return.
Growing numbers of savers are keen to keep their money in savings accounts instead of traditional deposits. Last year, savings accounts held 49 percent of total household savings, 6 percent more than in 2008. More people are also switching from time deposits to current accounts. In January, funds deposited in savings and current accounts increased by 70 percent, and in February the increase reached 72 percent. This may mean that savers are worried over the economic situation in Europe, or that they simply want to have unlimited access to cash without losing interest. Such proportions are the norm on well-developed markets in Western Europe, where current and savings accounts hold over 60 percent of all savings.
Investment funds are an alternative to savings accounts and bank deposits. Last year, savers in Poland put over zl.19 billion in investment funds, 25.9 percent more than in 2008. At the end of December, Poland's investment fund companies managed assets worth over zl.93 billion, according to data by the Analizy Online service. In January and February this year, a further zl.2.5 billion was paid into Polish investment funds-zl.1.6 billion in January and zl.900 million in February. Although customers invested zl.770 million net in money market and cash funds in February (86 percent of all investment), equity funds still account for 28 percent of all money invested in Polish investment funds.
Last year was bullish for those investors who put their assets in investment funds. The most profitable funds were those that invested their assets in the stock of the largest and most promising businesses listed on the Warsaw Stock Exchange. The annual rate of return for the best equity funds exceeded 60 percent last year, while balanced funds reported 40 percent return.
While Poland's GDP grew a reasonable 1.7 percent last year, some other economies such as China and India are growing much faster (8.7 and 7 percent respectively). For this reason, a good alternative to the Polish stock market could be foreign funds that seek profits on emerging markets in Brazil, Russia, India and China, or BRIC for short. Last year, BRIC funds yielded an annualized rate of return of over 80 percent. The driving force behind last year's increases were the stock markets in Russia and China which grew by 170 and 109 percent respectively.
Whenever you invest, you need to be guided by common sense and that particularly applies to investment in the capital market. You can control the risks by diversifying your portfolios and investing in different market segments and geographical locations. You also need to pick the right investment strategy to match your needs. You can obtain help in this area from professional bank advisers.
Tomasz Sobociński
Personal Banking Department Manager
Polbank EFG
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